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 retirement risks part 2

Editor's Note: This is Part 2 of a two-part series on retirement risks that we should definitely plan for. For more information on retirement money mishaps and how you can enjoy a comfortable retirement lifestyle, you may find helpful answers in The New Retirement Report

In the first half of this series, we discussed 5 of the 10 Retirement Risks you need to plan for. With apologies to the Late Night Show and Late Show, no Top 10 List would be complete with a stop at the halfway point. So, without further ado.... Here are 5 other retirement risks that retired and working-age investors should definitely heed.

As you read through this list, you may want to consider the strategies your plan has to manage these risks. If you are unsure or would like more confidence in your plan, a retirement-knowledgeable financial professional can help you. Their guidance can help identify potential financial gaps, clarify your needs, and solve for those shortcomings. 

retirement risks

Editor's Note: This is Part 1 of a two-part series on retirement risks that we should definitely plan for. For more information on potential retirement money mistakes and how you can enjoy a comfortable retirement lifestyle, you may find helpful answers in The New Retirement Report

Top Ten Lists were a signature of David Letterman’s Late Night and Late Show legacies. Now that he’s 70, if Letterman were to prepare such a list today, it might look something like this: "The Top Ten Retirement Risks I Didn’t See Coming, But Should Have."

While three decades on TV may give Dave the aplomb to tackle top retirement risks with more leniency, this isn't the case for everybody. Not everyone can be blasé about what they face as they enter and move through retirement. To help you look ahead—and plan accordingly—we offer these Top Ten Retirement Risks You CAN See Coming.

social security break even point age

When you begin claiming your Social Security benefits is one of the most important decisions you will make. Knowing when to start your benefits—and when not to—could mean thousands of more dollars to you, and your surviving spouse, when you could use the income the most.

But with so many claiming possibilities, when is the right time? 

You probably have heard arguments for claiming early and waiting. That being said, it pays off to understand the break-even ages for Social Security benefits, their impact, and how different claiming ages may compare.

 social security benefits to increase 2018

Good news! Next year, Social Security beneficiaries will get their biggest raise since 2012. The Social Security Administration reports that monthly benefits will receive a 2% Cost-of-Living Adjustment (COLA) in 2018.

For the average retiree, the increase amounts to around $27 extra a month. For the year, it adds up to an extra $324 in benefit payments. Social Security beneficiaries will see increased payments in January 2018, while increased payments for SSI beneficiaries will begin on December 29, 2017.

While this is welcome news, another development may offset the increased benefits for retirees. Many retirees actually may see little or no increase in payments. Most beneficiaries have Medicare Part B premiums taken from their Social Security. For those who have benefited from the “hold harmless” provision of Medicare law in recent years, Medicare may eat into some or all of the raise.

Let’s get more into the details of this now.

 guide to taxes on social security retirement benefits

When calculating individual benefits, the Social Security Administration draws on up to 35 years of personal earnings history. To receive Social Security benefits in the first place, you have to work at least 10 years. Therefore, it’s not that surprising that many people see their benefits as something they have earned.

Yet each year, Uncle Sam collects a share of people’s benefits through income taxes. You may have to pay taxes on as much as 50%-85% of your benefits, depending on how much income you report to the IRS.

how debt is crippling retirement goals

According to MagnifyMoney, people are carrying more than goal checklists into retirement. A recent analysis by them looked at data from the University of Michigan Retirement Research Center (MRRC) Health and Retirement Study. Their results found that more Americans are shouldering debt in their 50s and over.

It’s a serious finding, given that Americans have named mortgages and other debts among their top five money concerns. In the study, MRRC researchers survey over 20,000 Americans aged 50+ on many topics of financial well-being. This publication showed survey results from 2014.

MagnifyMoney found a number of debt trends that could undermine, or even cripple, the retirement goals of numerous Americans. Let’s look at how debt is affecting older Americans and their post-work lives.

safe money investments

As far as financial security goes, when thinking of retirement, it’s important to consider the safety of your financial portfolio.

Do you have reliable income streams in place for retirement, whether for a set period or life? Is there enough liquidity in your assets to allow you to retire comfortably? Is enough of your money safe and put in secure, dependable places? Do you have an appropriate financial strategy for combating the the impact of inflation, high-ticket expenses like long-term care, and other costly retirement risks?

All of this brings us to a discussion on building a dependable safety net and how to make sure that you can answer these questions with confidence.

do you need an emergency fund in retirement

Time and again, we are told of the importance of having an emergency fund. It makes sense, especially for retirement. After all, retirees are likely to have unexpected costs creep up, just like everyone else does. But according to a BankRate survey, even a small unexpected expense could be a struggle for many households.   

In the survey, nearly 60% didn’t have enough savings to pay for emergency expenses. Almost half (45%) said they or immediate family had incurred a major emergency expense in the last 12 months. Among high-income households and college graduates, nearly half lacked enough savings to handle emergency costs.

While emergency expenses can affect anyone, they may create harmful setbacks for retired households. Many retirees live on a fixed income. Without the fallback of healthy earned income, like that in the working years, they could find unexpected expenses to be disruptive. All of this underscores the practical wisdom of having financial cushioning for emergencies.

So, what’s a target amount to have in an emergency fund? And what are some ways you can build up emergency reserves? Here’s a quick look at some strategies.

top social security questions answered

Like other people, you probably hold a Social Security card. But unless you are close to retirement, you may not know that much about Social Security benefits. As a large governmental program, Social Security has many rules and moving parts that can affect you.

Social Security plays an important role for retired households. Among elderly beneficiaries, 48% of married couples and 71% of single persons receive half or more of their income from Social Security. As you near retirement, you may have questions of your own. Learning more about Social Security will help you get the most out of your benefits.

Because Social Security is a major income source for many people, when you claim benefits might be one of your most important retirement decisions. However, moving through the ins-and-outs of this program can be daunting. To help you get started with planning for your benefits and other income sources, here are answers to seven top Social Security questions.

 

safe money strategies blog

As we inch closer to our retirement age, it becomes more important for us to have more control of our money and the future. This is true for a variety of reasons. But for many of us, more control means a greater sense of financial security.

However, financial peace is hardly a happy accident. Rather, it comes from careful planning and following a well-laid-out strategy built for retirement, a plan that emphasizes income, safety, and protection. In simple terms, we can call this sort of plan a “Safe Money Strategy.”

Building a solid safe money strategy, however, is not as simple as it may sound. For one, the financial needs for each of us are different, especially at the near-retirement and post-retirement phases of life. And as the life expectancies of people in the U.S. have increased, retirement planning has certainly become important like never before.

There was a time not so long ago when our grandparents lived comfortably throughout their retirement years, relying mostly on their employer pension, Social Security, and perhaps other income sources. However, the golden days of pensions and other employer-sponsored income vehicles are long gone. Now our approach to retirement planning must be different, as it’s more of an individual responsibility than ever.

  what is safe money img

“What is safe money?” That is a question that many Americans are asking. And it’s not surprising why. From retirement presentations and dinner seminars to weekend financial talk shows and radio commercials, safe money is a common theme in many public forums.

Generally speaking, a broad definition of safe money is “the money you can’t afford to lose.” Since everyone has different needs, goals, and situations, this concept means different things to every person. For some, safe money could be lifelong savings they have built up and need to preserve. Or it might be accumulated wealth that needs to be protected from risk, as it will be a source of retirement income.

For others, it could be a stockpile of money they will need at a certain time, like funding their children’s college education, paying off the mortgage, or buying a luxury item for which they saved a long time. Yet for some other Americans, safe money might be a future account balance – a sum of money that they want to grow safely and efficiently.

So, the answer to “what is safe money?” is it depends. Your own needs, goals, and situation provide the financial context of its meaning. But boiling down to the essentials, safe money is about security and protection… money that is safe and as free from unnecessary risk as is possible.

generational conversations habits retirement planning

You have probably heard plenty of old platitudes about the importance of taking action. For many, “if you’re going to talk the talk, you’ve got to walk the walk” is one such truism. But in money matters, people often hesitate to prepare for their retirement future. For that matter, they might not even discuss it with their family and other loved ones.

In various research studies, the findings are stifling. Not only are Americans struggling with retirement readiness, debt, and living within their financial means. They may limit themselves in their discussions of financial matters. Money may be a taboo subject or people may be embarrassed about their personal financial circumstances to the point of not wanting to discuss them - not to mention other possible factors.

So, just how are Americans going about retirement and financial topics? And how might this affect future generational spending and saving practices? Let’s dive into the numbers.

donald trump retirement issues effects

Photo credit: Donald Trump at Marriott Marquis NYC, 2016. By Michael Vadon (2016), Photo Link, Attribution (http://creativecommons.org/licenses/by/2.0/). Photo attribution by PhotosforClass.com.

Just two weeks into his presidential tenure, Donald Trump already is taking swift action. From sweeping executive orders to bold ambitions for tax reform, immigration, job growth, and more, these times are a whirlwind. Many Americans wonder what it might mean for the future. What effects could a Trump administration have on issues relating to their retirement?

During the campaign season, President Trump was a political wildcard. Not all of his policy stances were clear, and at that point, that meant uncertainty and wide-ranging speculation for retirement investors. However, since entering the White House, Trump has clarified some of his policy positions. The question then becomes what all of this means for hard-working American households, whether retired or getting ready for that stage.

If you are retired or preparing to retire within the next four years, this post will go over a few important ways the Trump administration can be impactful. Read on for some quick takeaways that will be helpful for your retirement planning future.

important information dol rule

Photo Credit: The Frances Perkins Building located at 200 Constitution Avenue, N.W., in the Capitol Hill neighborhood of Washington, D.C. Built in 1975, the modernist office building serves as headquarters of the United States Department of Labor. U.S. Department of Labor Headquarters, Creative Commons Photo, Author "Agnostic Preacher Kid," May 30, 2010, Property solely of author. Distributed with permission through Creative Commons Attribution-ShareAlike 3.0 Unported LicenseAttribution-ShareAlike 3.0 Unported License.

As a retirement investor, you may have come across the “DOL fiduciary rule.” A new ruling from the Department of Labor, it is scheduled to go into effect on April 10, 2017. But just what this rule means – and more importantly, what it entails for you and other retirement savers – may be less than clear.

In short, the DOL fiduciary rule expands the definition of an “investment advice fiduciary,” as laid out in the Employment Retirement Income Security Act of 1974 (or ERISA). As we briefly discussed in another post on 401(k) rollover options, this elevates financial professionals to a new status, ethically and legally speaking. Those who are paid to give recommendations about retirement accounts will be treated as “fiduciaries” under the rule.

As a result, they will be obliged to put your interests as a client first. The rule will require they give recommendations in your “best interest” as a retirement investor. They will also need to disclose any potential conflicts of interest which could influence their recommendation when they provide you investment advice for a fee or other compensation.

For a brief rule overview and how it will bring change, read on for some critical, need-to-know facts. In our view, this ruling is generally speaking a positive step for consumer protection. It helps protect you and other hard-working Americans from financial professionals who act unethically, do not act in your best interest when they should be, or do not consider your complete financial position before making a recommendation. However, it’s unfortunate that this sort of advisor conduct should require government-imposed conflict-of-interest standards to be levied – financial professionals should always act in their clients’ best interest, period, without exception.

Some Possible Outcomes for the DOL Rule

There will be wide-sweeping changes to the industry, from capital investments by financial firms to move into compliance, as well as the business operational costs of maintaining compliance. As a result, in some ways retirement planning advice may be more costly to you and other retirement savers.

An important note: The DOL rule was published during the Obama administration; with the Trump administration coming in, there is a possibility of the rule being delayed past the April 10th deadline, being changed, or even being abolished.

Unwrapping the DOL Fiduciary Rule

As mentioned earlier, the definition of a fiduciary has been expanded from just financial professionals who give ongoing advice. Now it covers other professionals, including financial salespersons such as:

Top Retirement Issues

In the past, we’ve discussed ways to catch up on retirement saving. Other areas of focus have been how to determine how big your retirement fund should be, and the financial challenges seniors will face in retirement.

But what about retirement issues, in general? From healthcare expenses to accounting for all years of living in retirement planning, there’s a wide landscape with which to contend. Read on for more information about the top retirement issues of today.

What Retirement Issues Do Americans Face?

SafeMoneyMasterLogo img

In a prior blog post, we discussed the importance of discussing financial matters with the family. When it comes to retirement lifestyle needs, it’s important to take heed of potential pitfalls as well. There are a number of challenges which could impact seniors’ financial security.

Greater generational wealth, increased life expectancy, and technological innovations all have exercised a heavy hand on the retirement planning process. Now there are more years for which seniors should plan financially. But what are some of the challenges which can impact retirement security?

Let’s take a closer look at some of these potential pitfalls below.

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When it comes to retirement planning, there's no shortage of financial advice. But there’s hardly any such thing as a one-size-fits-all solution for everyone. As we have emphasized before, any strategy must make sense for your financial picture. And for that matter, any financial recommendation should always be in your best interest as a client.

These dynamics bring up the value of transparency. Financial decisions are life-impacting. They are hardly small matters. At the point-of-sale, people rely upon the word, knowledge, and expertise of the financial professional with whom they’re working.

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According to polling data from the National Institute on Retirement Security, Americans are frustrated with governmental efforts regarding their retirement. In a recent, nationwide public opinion survey, 87 percent said Washington policymakers don't understand how difficult it is to prepare for retirement. In another telling statistic, 84 percent indicated they thought Washington should be doing more to help ensure retirement security.

Along with these public sentiments, the retirement landscape in America itself is complicated:

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